[SMM Analysis] the Philippines will follow Indonesia's ban on the export of nickel mines. Speculate on the possibility from four key points

Recently, it was rumored in the market that members of the Philippine Mining Association proposed to ban the export of nickel ores. He said that the Philippines is rich in nickel mineral resources, but this may suffer from the so-called "Dutch disease." if a law can be passed to ban the export of nickel ores, and to set up nickel processing plants to process nickel in China, such as ferronickel smelters, leaching plants, conversion plants and refineries. Then the Philippines can become a developed country in 10 years or less.

Prior to this, as one of the countries with the richest nickel resources in the world, Indonesia's ban on nickel exports had a huge impact on the nickel market, and the news of the Philippines caused widespread unease in the market. China is the country with the greatest demand for nickel resources in the world, but its nickel ore resources are relatively scarce and are all nickel sulphide ores, while nickel laterite ores are all imported. Before Indonesia banned mining, the main sources of nickel laterite ore in China were Indonesia and the Philippines, while others such as Xinka and Guatemala also imported a small amount, but accounted for a relatively small proportion.

Countries with major nickel mineral resources in the world

Starting from 2020, Indonesia has formally imposed a total ban on mining, and the source of nickel laterite in China has been cut in half. SMM believes that there are three main reasons for the Indonesian government's firm ban on mining:

1. Increase the added value of the product;

2. Introducing foreign capital to promote the local development of Indonesia;

3. Learn the advanced smelting process of nickel industry for the development of the country itself.

So why did the Philippines, which is also rich in nickel resources, not follow the road of banning mining in Indonesia to develop its own smelting industry? SMM will analyze the reasons for the obvious differences in the development of nickel industry between the two countries from these points.

The difference of nickel ore reserves is obvious.

According to USGS data, the total land reserves of the world's nickel resources in 2019 are about 130 million metal tons, of which 60 per cent are laterite and 40 per cent are sulphide ores. Indonesian laterite nickel ore reserves are about 21 million nickel tons, while Philippine laterite nickel ore reserves are about 4.8 million nickel tons. Indonesia's reserves are 4.4 times that of the Philippines, and the Philippines' high-grade nickel mines (more than 1.7%) have basically dried up. Now the taste of Philippine mainstream shipments is basically 1.2-1.5. Most mines are in the middle and later stages, facing the problem of resource depletion. This taste is less attractive to Chinese companies. At present, the grade of nickel ore used by the pyrometallurgical smelters in Indonesia is basically higher than 1.7%, and the difference between reserves and grade is the main reason why Chinese investors choose Indonesia.

Auxiliary material problem

The infrastructure of the Philippines is backward, and the local coal resources are not rich enough, the power supply is difficult, the electricity charge is very high, and the cost of imported coal is high for self-built power plants.

Policy issues

Indonesia has frequently introduced policies to attract overseas investment in recent years, but the Philippines does not have a clear relevant policy at present, and the investment is risky. In addition to the policy of attracting overseas investment, the Philippines also has more restrictions on environmental protection policy than Indonesia, and it is relatively difficult to implement the development route at the cost of destroying the environment in the Philippines.

High profits available quickly

In addition to the above subjective problems in the Philippines itself, after the mining ban in Indonesia, the main source of Chinese nickel imports is the Philippines, which is in short supply. According to the current 1.5% Philippine ore price, 1.8% Philippine nickel ore can be sold for nearly $100 / wet ton in China, while Indonesia's 1.8% grade ore is less than $40. After deducting transportation costs and mining costs, the intermediate profit can reach more than US $70 / wet ton, which is a high profit available quickly. compared with this, it takes much longer to attract foreign investment to export high value-added products after the mining ban.

Taken together, although the market rumors proposed that the Philippines ban nickel ore exports, SMM believes that the Philippines is less likely to follow Indonesia's ban on nickel ore exports.